Learning, expectations formation, and the pitfalls of optimal control monetary policy

Journal of Monetary Economics

Volumn 55, Issue SUPPL., 2008, Pages

  Orphanides, Athanasios ^a   Williams, John C ^b  

^a Central Bank of Cyprus   (Cyprus)

^b FEDERAL RESERVE BANK OF SAN FRANCISCO   (United States)

Author keywords

Model uncertainty; Rational expectations; Robust control

Indexed keywords

EID: 52949138242     PISSN: 03043932     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jmoneco.2008.08.002     Document Type: Article

References (45)

1. Aoki K., and Nikolov K. Rule-based monetary policy under central bank learning. In: Clarida R.H., Frankel J.A., Giavazzi F., and West K.D. (Eds). NBER International Seminar on Macroeconomics 2004 (2006), The MIT Press, Cambridge, MA 145-181
2. Branch W.A., and Evans G.W. A simple recursive forecasting model. Economics Letters 91 (2006) 158-166
3. Brock W.A., Durlauf S., and West K.D. Model uncertainty and policy evaluation: some theory and empirics. Journal of Econometrics 127 (2007) 629-664
4. Carlson J.M., and Doyle J. Complexity and robustness. Proceedings of the National Academy of Sciences 99 (2002) 2538-2545
5. Cateau, G., 2007. Price-level or inflation-targeting under model uncertainty. Mimeo, Bank of Canada.
6. Chow G.C. Control methods for macroeconomic policy analysis. The American Economic Review 66 (1976) 340-345
7. Cogley T., and Sargent T.J. Evolving post-world war II U.S. inflation dynamics. In: Bernanke B.S., and Rogoff K.S. (Eds). NBER Macroeconomics Annual 2001 (2002), The MIT Press, Cambridge, MA 331-373
8. Congressional Budget Office, 2001. CBO's Method for Estimating Potential Output: An Update. Government Printing Office, Washington, DC.
9. Croushore, D., 1993. Introducing: the survey of professional forecasters. Federal Reserve Bank of Philadelphia Business Review, 3-13.
10. Croushore D., and Stark T. A real-time data set for macroeconomists. Journal of Econometrics 105 (2001) 111-130
11. D'Amico, S., Orphanides, A., 2006. Uncertainty and disagreement in economic forecasting. Mimeo, Board of Governors of the Federal Reserve System.
12. Evans G., and Honkapohja S. Learning and Expectations in Macroeconomics (2001), Princeton University Press, Princeton
13. Ferrero G. Monetary policy, learning and the speed of convergence. Journal of Economic Dynamics and Control 31 (2007) 3006-3041
14. Gaspar, V., Smets, F., Vestin, D., 2006. Adaptive learning, persistence, and optimal monetary policy. European Central Bank Working Paper.
15. Giannoni M.P., and Woodford M. Optimal inflation targeting rules. In: Bernanke B.S., and Woodford M. (Eds). The Inflation Targeting Debate (2005), University of Chicago Press, Chicago 93-162
16. Hall, R.E., 1984. Monetary strategy with an elastic price standard. In: Price Stability and Public Policy: A Symposium Sponsored by the Federal Reserve Bank of Kansas City. Federal Reserve Bank of Kansas City, Kansas City, pp. 137-159.
17. Hansen L.P., and Sargent T.J. Robustness (2007), Princeton University Press, Princeton
18. Hoerl A.E., and Kennard R.W. Ridge regression: biased estimation of nonorthogonal problems. Technometrics 12 (1970) 69-82
19. Levin A.T., and Williams J.C. Robust monetary policy with competing reference models. Journal of Monetary Economics 50 (2003) 945-975
20. Levin A.T., Wieland V., and Williams J.C. Robustness of simple monetary policy rules under model uncertainty. In: Taylor J.B. (Ed). Monetary Policy Rules (1999), University of Chicago Press, Chicago 263-299
21. Levin A.T., Wieland V., and Williams J.C. The performance of forecast-based policy rules under model uncertainty. American Economic Review 93 (2003) 622-645
22. Mankiw N.G., Reis R., and Wolfers J. Disagreement about inflation expectations. In: Gertler M., and Rogoff K. (Eds). NBER Macroeconomics Annual 2003 (2003), The MIT Press, Cambridge, MA 209-248
23. Marcet A., and Sargent T.J. Convergence of least squares learning mechanisms in self-referential linear stochastic models. Journal of Economic Theory 48 (1989) 337-368
24. McCallum B.T. Robustness properties of a rule for monetary policy. Carnegie-Rochester Conference Series on Public Policy 29 (1988) 173-203
25. Milani F. Expectations, learning, and macroeconomic persistence. Journal of Monetary Economics 54 (2007) 2065-2082
26. Orphanides A., and Williams J.C. Robust monetary policy rules with unknown natural rates. Brookings Papers on Economic Activity 2002 2 (2002) 63-118
27. Orphanides A., and Williams J.C. Imperfect knowledge, inflation expectations and monetary policy. In: Bernanke B.S., and Woodford M. (Eds). The Inflation Targeting Debate (2005), University of Chicago Press, Chicago 201-234
28. Orphanides A., and Williams J.C. Inflation targeting under imperfect knowledge. In: Mishkin F., and Schmidt-Hebbel K. (Eds). Monetary Policy Under Inflation Targeting (2007), Central Bank of Chile, Santiago 77-123
29. Orphanides A., and Williams J.C. Robust monetary policy with imperfect knowledge. Journal of Monetary Economics 54 (2007) 1406-1435
30. Rogoff K. The optimal degree of commitment to an intermediate monetary target. Quarterly Journal of Economics 100 (1985) 1169-1190
31. Sargent T.J. The Conquest of American Inflation (1999), Princeton University Press, Princeton
32. Sargent, T.J., 2007. Evolution and intelligent design. Mimeo, New York University.
33. Sheridan, N., 2003. Forming inflation expectations. Mimeo, Johns Hopkins University.
34. Smets F. Maintaining price stability: how long is the medium term?. Journal of Monetary Economics 50 (2003) 1293-1309
35. Svensson L.E.O. Inflation targeting: should it be modeled as an instrument rule or a targeting rule?. European Economic Review 46 (2002) 771-780
36. Svensson L.E.O., and Tetlow R. Optimum policy projections. International Journal of Central Banking 1 (2006) 177-207
37. Svensson, L.E.O., Williams, N., 2007. Monetary policy with model uncertainty: distribution forecast targeting. Mimeo, Princeton University.
38. Svensson L.E.O., and Woodford M. Indicators for optimal policy. Journal of Monetary Economics 50 (2003) 691-720
39. Taylor J.B. Monetary policy during a transition to rational expectations. Journal of Political Economy 83 (1975) 1009-1021
40. Taylor J.B. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy 39 (1993) 195-214
41. Taylor J.B. The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank. Journal of Monetary Economics 43 (1999) 655-679
42. Tetlow, R,J., 2006. Real-time model uncertainty in the United States: "robust" policies put to the test. Mimeo, Federal Reserve Board.
43. Williams J.C. Discussion of disagreement about inflation expectations. In: Gertler M., and Rogoff K. (Eds). NBER Macroeconomics Annual 2003 (2003), The MIT Press, Cambridge, MA 257-268
44. Williams, J.C., 2003b. Simple rules for monetary policy. Federal Reserve Bank of San Francisco Review, pp. 1-12.
45. Woodford M. Interest and Prices: Foundations of a Theory of Monetary Policy (2003), Princeton University Press, Princeton